HONA changes
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- About
- Honeywell Aerospace makes equipment and parts for aircraft and spacecraft. Its main product lines are avionics and navigation systems, engines and auxiliary power units, and aircraft control systems, plus satellite communication products, including laser links. added: It reports three segments: Electronic Solutions, Engines and Power Systems, and Control Systems. Aircraft makers like Airbus and Boeing, and business jet makers, buy this equipment new as original equipment (OE), a lower-margin sale. Once the equipment is installed, Honeywell then earns higher-margin, recurring revenue for decades by selling replacement parts, repairs, and overhauls, called the aftermarket. removed: A separate Defense and Space segment sells added: Sales to the US and allied removed: militaries. added: militaries and to space programs form a separate end market, Defense and Space. Honeywell Aerospace became an independent public company on June 29, 2026, when Honeywell International, renamed Honeywell Technologies (ticker HON), spun it off. This followed Honeywell's earlier spin-off of Solstice Advanced Materials (ticker SOLS) on October 30, 2025, completing a three-way breakup that left Honeywell Technologies as a smaller, pure-play automation company. Honeywell Aerospace is headquartered in Phoenix, Arizona, employs more than 36,000 people, added: and serves more than 10,000 customers removed: worldwide, and added: worldwide. It joined the S&P 500 and added: the S&P 100 added: at the removed: day it began trading. added: spin-off. It left the S&P 100 on September 21, 2026, and stays in the S&P 500.
- Thesis
- Most of the discount opened on a single day, August removed: 5, added: 6, 2026. removed: That day, added: The evening before, Honeywell Aerospace cut its first full-year guidance as an independent company. It blamed a shortage of castings, forgings, and other mechanical parts from a small group of suppliers. The stock fell removed: as much as 24% that day. added: 23% on August 6. A securities class action lawsuit filed weeks later argues management understated how bad the shortage was. The company also carries about $16 billion of debt from its own spin-off and pays no dividend yet. That leaves little financial room for a further setback. The gap can close if the supply shortage eases as management now expects. That would let removed: deferred added: more aftermarket removed: revenue, added: parts, Honeywell's highest-margin business, reach customers. Orders removed: still grew 8% in added: for the removed: most recent quarter added: twelve months to June 2026 grew 8%, and the backlog removed: stands around $18 billion. added: was $18.2 billion at the end of June, up 9%. So the case rests on supply catching up with demand, not on demand itself. removed: A large added: Large order removed: win, added: wins, like the added: July 2026 IndiGo avionics deal removed: covering more than 800 added: for 810 aircraft, removed: needs added: need to removed: keep showing added: show up in revenue rather than removed: staying added: stay stuck in the backlog. Management removed: has reaffirmed its 2030 removed: targets, added: targets in September 2026, but investors have no multi-year standalone track record to check removed: that added: them against yet. Honeywell Aerospace will report third-quarter 2026 results on October 28, 2026, after the market closes. That is the next chance to show supply is improving. If the shortage eases and the pending class action does not produce a large judgment, the discount could start to close over the next three to five quarters, not before 2027.
- Risks
- A shortage of mechanical parts, such as removed: castings, forgings, added: castings and removed: bearings, added: forgings, from a small number of suppliers forced Honeywell Aerospace to cut its full-year 2026 added: organic sales growth guidance from 7%-9% to 4%-5%, and cut adjusted EBIT guidance by removed: roughly added: about $300 million, in its very first quarter as a public company. removed: The added: In September 2026, the CEO removed: has already admitted he misjudged how long added: said the removed: fix would take once. added: company reacted too late to the supplier problems. Honeywell Aerospace issued about $16 billion of senior notes to fund its own spin-off from Honeywell Technologies, and pays no dividend removed: yet as of September 2026. added: yet. This debt load leaves less room to absorb a further supply chain delay or a slowdown in aircraft or defense demand. The company has no earnings history as an independent business before its August 2026 debut report. Investors cannot yet check management's guidance and cost estimates against a multi-year standalone track record. The parts shortage removed: pushed Honeywell Aerospace's mix toward lower-margin original equipment and domestic added: cut shipments of international defense removed: sales, and away from added: products, which have high margins, in the second quarter of 2026. Commercial aftermarket sales still grew 8%. If supply stays short, the company cannot ship its removed: higher-margin commercial added: full aftermarket and removed: international defense removed: business. If that mix does not recover once supply improves, added: backlog, and margins stay under pressure. Revenue depends on aircraft production rates at Boeing and Airbus, airline flight activity, and US and allied defense budgets, none of which Honeywell Aerospace controls. A slowdown in any of these would slow growth further on top of the current supply problem. A securities class action (Green v. Honeywell removed: Aerospace added: Aerospace, Inc., filed in the District of Arizona) alleges the company misled investors about supplier concentration risk and did not disclose a DOJ cybersecurity investigation before its August 2026 guidance cut. The case is at an early stage, with a lead-plaintiff deadline of November 23, 2026, but an adverse outcome could add legal costs and management distraction on top of the supply-chain problem. added: The 10-Q for the quarter that ended June 27, 2026 shows $828 million of environmental liabilities. The company says the final cost could be two to three times the amount it recorded.
- Balance sheet
- Cash: $1.1B Debt: $16.0B Net debt: $14.9B Undrawn credit line: $4.0B Last debt due: 2066 Ratings: S&P BBB+ (positive outlook), Fitch A- (stable outlook), Moody's A3 (stable outlook) Honeywell Aerospace started life with debt that it did not use for its own business. removed: In added: On March added: 16, 2026, it issued $16.0 billion of senior removed: unsecured notes in nine removed: series and paid added: series. It gave Honeywell $15.1 billion removed: of added: for the removed: proceeds to Honeywell as part added: spin-off: $9.1 billion in cash and $6.0 billion of the removed: spin-off. Thus total added: notes. Total equity was negative $5.6 billion at June 27, 2026. This comes from that payment to the former parent, not from losses, so it is not a sign of distress by itself. The added: fixed-rate notes have an average coupon of about removed: 5.0% added: 5.0%, and removed: mature from 2028. added: $0.5 billion floats with SOFR. Only $1.25 billion is due before removed: 2029, and almost all of the notes are at fixed rates. added: 2029. Net debt added: of $14.9 billion is about 3.4 times the guided 2026 adjusted EBIT of $4.35 to $4.45 billion. removed: The added: Two undrawn removed: revolving credit removed: lines added: lines, $1.0 billion for 364 days and $3.0 billion for five years, back a $4.0 billion commercial paper program. The company also removed: owes added: pays Honeywell $1.125 billion over removed: less than five removed: years added: years, in monthly payments of $18.75 million, for the right to use the Honeywell name. This works like extra debt. Interest removed: costs are about added: cost was $200 million removed: a added: in the second quarter, and guided second-half free cash flow is $1.0 to $1.5 billion. removed: This leaves limited room for buybacks or added: The board approved a added: $3.5 billion buyback on July 23, 2026, and the company expects to pay a dividend added: in line with its peers. Both compete with debt reduction until earnings recover from the parts shortage. As of Jun 27, 2026.
- Recent events
- added: Oct 7, 2026: Goldman Sachs started coverage of Honeywell Aerospace with a Neutral rating and a $190 price target. Two days later, TD Cowen cut its target to $170 from $180 and kept a Hold rating. Sep removed: 24, added: 30, 2026: removed: A added: Law firms announced a securities class action, Green v. Honeywell removed: Aerospace added: Aerospace, Inc. (D. Ariz., No. 26-cv-06779), removed: was announced on behalf of investors who bought shares between June 29 and September 1, 2026. It alleges Honeywell Aerospace made false or misleading statements about supplier concentration risk and did not disclose the DOJ cybersecurity investigation before its August 5, 2026 guidance cut. The lead-plaintiff deadline is November 23, 2026. Sep added: 29, 2026: Honeywell Aerospace confirmed that it will report third-quarter 2026 results on October 28, 2026, after the Nasdaq close, with a call at 5:00 p.m. EDT. Sep 14, 2026: Melius Research downgraded Honeywell Aerospace to Hold from Buy and cut its price target to removed: $190, citing worry that added: $190 from $216. Reports said Melius expects slower aftermarket growth next year. Sep 9, 2026: At investor conferences in September, CEO James Currier said the removed: rate added: company reacted too late to its supplier problems. He said ten suppliers of removed: change added: metal parts are the main bottlenecks. Sep 4, 2026: S&P Dow Jones Indices said Honeywell Aerospace would leave the S&P 100 on September 21, 2026. The stock stays in removed: its fundamentals and valuation could turn negative. added: the S&P 500. Sep 1, 2026: removed: A company director added: Director Craig Arnold bought 6,400 Honeywell Aerospace shares at $156.00 each, added: about $1.0 million, in an open-market removed: insider purchase. Sep 1, 2026: The US removed: Department added: Attorney's Office for the Western District of removed: Justice added: North Carolina announced that Honeywell Aerospace agreed to pay removed: more than $2 added: $2.04 million to settle False Claims Act allegations that it removed: failed to comply with added: did not meet cybersecurity requirements in removed: a US Department of Defense removed: contract. added: contracts from 2020 to 2023. Aug added: 19, 2026: Morgan Stanley upgraded Honeywell Aerospace to Overweight from Equal Weight, with a $205 price target. The stock rose about 6% that day. Aug 12, 2026: Honeywell Aerospace completed an exchange offer, swapping about $16 billion of unregistered senior notes issued for the spin-off into registered notes, with 98% or more of each series tendered. Aug 5, 2026: Honeywell Aerospace reported its first quarterly results as an independent public company: Q2 2026 revenue of $4.52 billion, up 5% removed: organically, but full-year added: organically. It cut 2026 added: organic sales growth guidance removed: was cut on supply chain constraints. Shares fell as much as 24% added: to 4% to 5% from 7% to 9%, and adjusted EBIT guidance to $4.35 to $4.45 billion, because of parts shortages. It also disclosed a $3.5 billion share buyback that the added: board approved on July 23, 2026. The next removed: trading day, added: the stock fell to a removed: 52-week low of removed: $150.03. added: $150.03 and closed 23% lower, at $156.47. Jul 20, 2026: IndiGo chose Honeywell Aerospace avionics and auxiliary power units for 810 Airbus A320neo-family aircraft. The companies did not disclose the value of the deal. Jun 29, 2026: Honeywell Aerospace completed its spin-off from Honeywell Technologies and began trading on Nasdaq as removed: HONA, joining added: HONA. It also joined the S&P 500 and the S&P removed: 100 the same day. added: 100. Oct 30, 2025: Honeywell completed the spin-off of Solstice Advanced Materials (ticker SOLS), the first of the two spin-offs that separated Honeywell into three independent companies.